USD Partners LP [USDP] Filings

10-Q 1 usdp-20230331.htm 10-Q USD PARTNERS 3-31-2023 usdp-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-36674

USD PARTNERS LP

(Exact Name of Registrant as Specified in Its Charter)


Delaware						30-0831007
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

811 Main Street, Suite 2800

Houston, Texas 77002

(Address of Principal Executive Offices) (Zip Code)

(Registrant’s Telephone Number, Including Area Code): (281) 291-0510

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Units Representing Limited Partner Interests	USDP	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 28, 2023, there were 33,758,607 common units outstanding.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Statements of Operations	1
	Consolidated Statements of Comprehensive Income	2
	Consolidated Statements of Cash Flows	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Partners’ Capital	5
	Notes to the Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	48
Item 4.	Controls and Procedures	48

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 6.	Exhibits	49
SIGNATURES		51

Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q, or this “Report,” to “USD Partners,” “USDP,” “the Partnership,” “we,” “us,” “our,” or like terms refer to USD Partners LP and its subsidiaries.

Unless the context otherwise requires, all references in this Report to (i) “our general partner” refer to USD Partners GP LLC, a Delaware limited liability company; (ii) “USD” refers to US Development Group, LLC, a Delaware limited liability company, and where the context requires, its subsidiaries; (iii) “USDG” and “our sponsor” refer to USD Group LLC, a Delaware limited liability company and currently the sole direct subsidiary of USD; (iv) “Energy Capital Partners” refers to Energy Capital Partners III, LP and its parallel and co-investment funds and related investment vehicles; and (v) “Goldman Sachs” refers to The Goldman Sachs Group, Inc. and its affiliates.

Cautionary Note Regarding Forward-Looking Statements

This Report includes forward-looking statements, which are statements that frequently use words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “position,” “projection,” “should,” “strategy,” “target,” “will” and similar words. Although we believe that such forward-looking statements are reasonable based on currently available information, such statements involve risks, uncertainties and assumptions and are not guarantees of performance. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forward-looking statements. Any forward-looking statement made by us in this Report speaks only as of the date on which it is made, and we undertake no obligation to publicly update any forward-looking statement. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from those in the forward-looking statements include: (1) our ability to continue as a going concern; (2) the impact of world health events, epidemics and pandemics, such as the novel coronavirus (COVID-19) pandemic; (3) changes in general economic conditions and commodity prices, including as a result of the invasion of Ukraine by Russia and its regional and global ramifications, inflationary pressures, slowing growth or recession or instability of financial institutions; (4) the effects of competition, in particular, by pipelines and other terminal facilities; (5) shut-downs or cutbacks at upstream production facilities, refineries or other related businesses; (6) government regulations regarding oil production, including if the Alberta Government were to resume setting production limits; (7) the supply of, and demand for, terminalling services for crude oil and biofuels; (8) the price and availability of debt and equity financing, whether through capital markets, lending or sale of assets; (9) actions by third parties, including customers, potential customers, construction-related services providers, our sponsors and our lenders, including with respect to modifications to or waivers under our credit agreement in light of the current uncertainty regarding our ability to remain in compliance with the covenants or to refinance the credit agreement before its maturity; (10) our ability to obtain additional sources of capital and maintain sufficient liquidity; (11) our ability to enter into new contracts for uncontracted capacity and to renew or replace expiring contracts; (12) hazards and operating risks that may not be covered fully by insurance; (13) disruptions due to equipment interruption or failure at our facilities or third-party facilities on which our business is dependent; (14) natural disasters, weather-related delays, casualty losses and other matters beyond our control; (15) changes in laws or regulations to which we are subject, including compliance with environmental and operational safety regulations, that may increase our costs or limit our operations; and (16) our ability to successfully identify and finance potential acquisitions, development projects and other growth opportunities. For additional factors that may affect our results, see “Risk Factors” and the other information included elsewhere in this Report and our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which is available to the public over the Internet at the website of the U.S. Securities and Exchange Commission, or SEC, (www.sec.gov) and at our website (www.usdpartners.com).

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

USD PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS (1)


	Three Months Ended March 31,
	2023		2022
	(unaudited; in thousands of US dollars, except per unit amounts)
Revenues
Terminalling services	$	19,739	$	33,823
Terminalling services — related party	714		655


Fleet leases — related party	283		912

Fleet services — related party	85		299
Freight and other reimbursables	190		97
Freight and other reimbursables — related party	115		—
Total revenues	21,126		35,786
Operating costs
Subcontracted rail services	3,285		3,991
Pipeline fees	5,473		8,501
Freight and other reimbursables	305		97
Operating and maintenance	1,761		3,486
Operating and maintenance — related party	—		131
Selling, general and administrative	4,400		3,422
Selling, general and administrative — related party	2,184		5,324

Gain on sale of business	(6,202)		—
Depreciation and amortization	1,906		5,839
Total operating costs	13,112		30,791
Operating income	8,014		4,995
Interest expense	4,441		1,502
Loss (gain) associated with derivative instruments	1,850		(6,084)
Foreign currency transaction loss	54		1,647
Other income, net	(34)		(23)
Income before income taxes	1,703		7,953
Provision for (benefit from) income taxes	(272)		480
Net income	$	1,975	$	7,473
Net income attributable to limited partner interests	$	1,975	$	8,842
Net income per common unit (basic and diluted)	$	0.06	$	0.32
Weighted average common units outstanding	33,566		27,440

(1)As discussed in Note 1. Organization and Basis of Presentation, our consolidated financial statements have been retrospectively recast to include the pre-acquisition results of the Hardisty South Terminal which we acquired effective April 1, 2022 because the transaction was between entities under common control.

The accompanying notes are an integral part of these consolidated financial statements.

USD PARTNERS LP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (1)


	Three Months Ended March 31,
	2023		2022
	(unaudited; in thousands of US dollars)
Net income	$	1,975	$	7,473
Other comprehensive income — foreign currency translation	86		594
Comprehensive income	$	2,061	$	8,067

The accompanying notes are an integral part of these consolidated financial statements.

USD PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS (1)


	Three Months Ended March 31,
	2023		2022
	(unaudited; in thousands of US dollars)
Cash flows from operating activities:
Net income	$	1,975	$	7,473
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	1,906		5,839
Loss (gain) associated with derivative instruments	1,850		(6,084)
Settlement of derivative contracts	185		(273)
Unit based compensation expense	1,033		1,237
Gain on sale of business	(6,202)		—
Deferred income taxes	5		197
Amortization of deferred financing costs	318		356


Changes in operating assets and liabilities:
Accounts receivable	5		(5,054)
Accounts receivable — related party	17		421
Prepaid expenses, inventory and other assets	375		2,369

Accounts payable and accrued expenses	2,061		4,064
Accounts payable and accrued expenses — related party	(402)		721
Deferred revenue and other liabilities	(3,899)		(2,017)
Deferred revenue and other liabilities — related party	191		(16)
Net cash provided by (used in) operating activities	(582)		9,233
Cash flows from investing activities:
Additions of property and equipment	(375)		(200)

Net proceeds from the sale of business	32,650		—

Net cash provided by (used in) investing activities	32,275		(200)
Cash flows from financing activities:
Distributions	(2,154)		(3,518)
Payments for deferred financing costs	(181)		(13)
Vested phantom units used for payment of participant taxes	(671)		(1,052)


Repayments of long-term debt	—		(6,396)

Net cash used in financing activities	(3,006)		(10,979)
Effect of exchange rates on cash	35		1,165
Net change in cash, cash equivalents and restricted cash	28,722		(781)
Cash, cash equivalents and restricted cash — beginning of period	5,780		12,717
Cash, cash equivalents and restricted cash — end of period	$	34,502	$	11,936

The accompanying notes are an integral part of these consolidated financial statements.

USD PARTNERS LP

CONSOLIDATED BALANCE SHEETS


	March 31, 2023		December 31, 2022
	(unaudited; in thousands of US dollars, except unit amounts)
ASSETS
Current assets
Cash and cash equivalents	$	10,843	$	2,530
Restricted cash	23,659		3,250
Accounts receivable, net	1,716		2,169
Accounts receivable — related party	392		409
Prepaid expenses	2,938		3,188

Other current assets	1,555		1,746

Total current assets	41,103		13,292
Property and equipment, net	82,424		106,894
Intangible assets, net	—		3,526

Operating lease right-of-use assets	1,138		1,508
Other non-current assets	1,376		1,556

Total assets	$	126,041	$	126,776

LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities
Accounts payable and accrued expenses	$	4,976	$	3,389
Accounts payable and accrued expenses — related party	745		1,147

Deferred revenue	2,572		3,562
Deferred revenue — related party	122		128
Long-term debt, current portion	214,206		214,092
Operating lease liabilities, current	382		700
Other current liabilities	5,163		7,907
Other current liabilities — related party	60		11
Total current liabilities	228,226		230,936




Operating lease liabilities, non-current	694		688
Other non-current liabilities	9,159		7,556
Other non-current liabilities — related party	147		—
Total liabilities	238,226		239,180
Commitments and contingencies
Partners’ capital
Common units (33,758,607 and 33,381,187 outstanding at March 31, 2023 and December 31, 2022, respectively)	(108,130)		(108,263)

Accumulated other comprehensive loss	(4,055)		(4,141)
Total partners’ capital	(112,185)		(112,404)
Total liabilities and partners’ capital	$	126,041	$	126,776

The accompanying notes are an integral part of these consolidated financial statements.

USD PARTNERS LP

THREE MONTHS CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (1)


	Three Months Ended March 31,
	2023			2022
	Units	Amount		Units	Amount
	(unaudited; in thousands of US dollars, except unit amounts)
Common units
Beginning balance at January 1	33,381,187	$	(108,263)	27,268,878	$	16,355

Common units issued for vested phantom units	377,420	(671)		351,031	(1,052)

Net income	—	1,975		—	8,842
Unit based compensation expense	—	983		—	1,149
Distributions	—	(2,154)		—	(3,459)

Ending balance at March 31,	33,758,607	(108,130)		27,619,909	21,835















General Partner units
Beginning balance at January 1	—	—		461,136	5,678
Non-cash contribution to Hardisty South entities from Sponsor prior to acquisition	—	—		—	18,207
Net loss	—	—		—	(1,369)

Distributions	—	—		—	(59)

Ending balance at March 31,	—	—		461,136	22,457
Accumulated other comprehensive income (loss)
Beginning balance at January 1		(4,141)			(178)
Cumulative translation adjustment		86			594
Ending balance at March 31,		(4,055)			416
Total partners’ capital at March 31,		$	(112,185)		$	44,708

The accompanying notes are an integral part of these consolidated financial statements.

USD PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

USD Partners LP and its consolidated subsidiaries, collectively referred to herein as we, us, our, the Partnership and USDP, is a fee-based, growth-oriented master limited partnership formed in 2014 by US Development Group, LLC, or USD, through its wholly-owned subsidiary, USD Group LLC, or USDG. We were formed to acquire, develop and operate midstream infrastructure and complementary logistics solutions for crude oil, biofuels and other energy-related products. We generate substantially all of our operating cash flows from multi-year, take-or-pay contracts with primarily investment grade customers, including major integrated oil companies, refiners and marketers. Our network of crude oil terminals facilitate the transportation of heavy crude oil from Western Canada to key demand centers across North America. Our operations include railcar loading and unloading, storage and blending in onsite tanks, inbound and outbound pipeline connectivity, truck transloading, as well as other related logistics services. We also provide one of our customers with leased railcars and fleet services to facilitate the transportation of liquid hydrocarbons by rail. We do not generally take ownership of the products that we handle, nor do we receive any payments from our customers based on the value of such products.

A substantial amount of the operating cash flows related to the terminal services that we provide are generated from take-or-pay contracts with minimum monthly commitment fees and, as a result, are not directly related to actual throughput volumes at our crude oil terminals. Throughput volumes at our terminals are primarily influenced by the difference in price between Western Canadian Select, or WCS, and other grades of crude oil, commonly referred to as spreads, rather than absolute price levels. WCS spreads are influenced by several market factors, including the availability of supplies relative to the level of demand from refiners and other end users, the price and availability of alternative grades of crude oil, the availability of takeaway capacity, as well as transportation costs from supply areas to demand centers.

On March 31, 2023, we completed our divestiture of all of the equity interests in our Casper Terminal, which included the Casper Crude to Rail, LLC and CCR Pipeline, LLC entities, for approximately $33 million in cash, subject to customary adjustments. Refer to Note 3. Acquisition and Dispositions — Casper Terminal Divestiture for additional details regarding this disposition. The Casper Terminal was included in our Terminalling Services segment.

On April 6, 2022, we completed the acquisition of 100% of the entities owning the Hardisty South Terminal assets from USDG, exchanged our sponsor’s economic general partner interest in us for a non-economic general partner interest and eliminated our sponsor’s incentive distribution rights, or IDRs, for a total consideration of $75 million in cash and 5,751,136 common units, that was made effective as of April 1, 2022. The acquisition was determined to be a business combination of entities under common control. Refer to Note 3. Acquisition and Dispositions — Hardisty South Terminal Acquisition for more information. The entities acquired in the Hardisty South acquisition have been included in our Terminalling Services segment.

Basis of Presentation

Our accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim consolidated financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for complete consolidated financial statements.

Our unaudited interim consolidated financial statements and related notes for the three months ended March 31, 2022 have been retrospectively recast to include the pre-acquisition results of the Hardisty South Terminal because the acquisition represented a business combination between entities under common control.

In the opinion of our management, our unaudited interim consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, which our management considers necessary to present fairly our financial position as of March 31, 2023, our results of operations for the three months

ended March 31, 2023 and 2022, and our cash flows for the three months ended March 31, 2023 and 2022. We derived our consolidated balance sheet as of December 31, 2022, from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Our results of operations for the three months ended March 31, 2023 and 2022 should not be taken as indicative of the results to be expected for the full year due to fluctuations in the supply of and demand for crude oil and biofuels, timing and completion of acquisitions, if any, changes in the fair market value of our derivative instruments and the impact of fluctuations in foreign currency exchange rates. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Going Concern

We evaluate at each annual and interim period whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. Our evaluation is based on relevant conditions and events that are known and reasonably knowable at the date that the consolidated financial statements are issued. The maturity date of our Credit Agreement (as defined below) is November 2, 2023. As a result of the maturity date being within 12 months after the date that these financial statements were issued, the amounts due under our Credit Agreement have been included in our going concern assessment. Our ability to continue as a going concern is dependent on the refinancing or the extension of the maturity date of our Credit Agreement. If we are unable to refinance or extend the maturity date of our Credit Agreement, we do not currently have sufficient cash on hand or available liquidity to repay the maturing credit facility debt as it becomes due, nor do we expect cash flow from our current operations to provide sufficient funds for such repayment.

In addition to the above, there is uncertainty in our ability to remain in compliance with the covenants contained in our amended Credit Agreement for a period of 12 months after the date these financials were issued. Although we continue to focus on renewing, extending or replacing expired or expiring customer agreements at the Hardisty and Stroud Terminals, unless we are able to renew, extend or replace such agreements more quickly than we currently expect as of the date of this report, and the pricing environment improves relative to our current expectations, we do not expect that we will be able to remain in compliance with the total leverage ratio and interest coverage covenants in the Credit Agreement for the third quarter of 2023. If we fail to comply with such covenants in the Credit Agreement, we would be in default under the terms of the Credit Agreement, which would entitle our lenders to declare all outstanding indebtedness thereunder to be immediately due and payable. We are currently not projected to have sufficient cash on hand or available liquidity to repay the Credit Agreement should the lenders not provide a further waiver or amendment and declare all outstanding indebtedness thereunder to be immediately due and payable.

The conditions described above raise substantial doubt about our ability to continue as a going concern for the next 12 months.

We are currently in discussions with our lenders and other potential capital providers and pursuing plans to refinance or replace our Credit Agreement or extend and amend the current obligations under the Credit Agreement, however we cannot make assurances that we will be successful in these efforts, or that any refinancing, extension or replacement would be on terms favorable to us. Moreover, our ability to refinance our outstanding indebtedness under, or extend the maturity date of, our Credit Agreement is expected to be negatively impacted to the extent we are unable to renew, extend or replace our customer agreements at the Hardisty and Stroud Terminals or experience further prolonged delays in doing so.

Due to the substantial doubt about our ability to continue as a going concern discussed above, as of March 31, 2023, we have recorded a valuation allowance against our deferred tax asset that is associated with our Canadian entities. These consolidated financial statements do not include any other adjustments that might result from the outcome of this uncertainty, nor do they include adjustments to reflect the possible future effects of the recoverability and classification of recorded asset amounts and classifications of liabilities that might be necessary should we be unable to continue as a going concern.

Comparative Amounts

We have made certain reclassifications to the amounts reported in the prior year to conform with the current year presentation. None of these reclassifications have an impact on our operating results, cash flows or financial position.

Foreign Currency Translation

We conduct a substantial portion of our operations in Canada, which we account for in the local currency, the Canadian dollar. We translate most Canadian dollar denominated balance sheet accounts into our reporting currency, the U.S. dollar, at the end of period exchange rate, while most accounts in our statement of operations accounts are translated into our reporting currency based on the average exchange rate for each monthly period. Fluctuations in the exchange rates between the Canadian dollar and the U.S. dollar can create variability in the amounts we translate and report in U.S. dollars.

Within these consolidated financial statements, we denote amounts denominated in Canadian dollars with “C$” immediately prior to the stated amount.

US Development Group, LLC

USD and its affiliates are engaged in designing, developing, owning and managing large-scale multi-modal logistics centers and energy-related infrastructure across North America. USD is the indirect owner of our general partner through its direct ownership of USDG and is currently owned by Energy Capital Partners, Goldman Sachs and certain of USD’s management team.

2. RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

Liabilities — Supplier Finance Programs (ASU 2022-04)

In September 2022, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2022-04, or ASU 2022-04, which amends Accounting Standards Codification Topic 405 to require that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. To achieve that objective, the buyer should disclose qualitative and quantitative information about its supplier finance programs. In each annual reporting period, the buyer should disclose the key terms of the program, including a description of the payment terms and assets pledged as security or other forms of guarantees provided for the committed payment to the finance provider or intermediary. For the obligations that the buyer has confirmed as valid to the finance provider or intermediary the amount outstanding that remains unpaid by the buyer as of the end of the annual period, a description of where those obligations are presented in the balance sheet and a rollforward of those obligations during the annual period, including the amount of obligations confirmed and the amount of obligations subsequently paid should be disclosed. In each interim reporting period, the buyer should disclose the amount of obligations outstanding that the buyer has confirmed as valid to the finance provider or intermediary as of the end of the interim period. The pronouncement is effective for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption was permitted.

We adopted all the provisions of ASU 2022-04 on January 1, 2023. Our adoption of this standard had no significant impact on our financial statements.

3. ACQUISITIONS AND DISPOSITIONS

Hardisty South Terminal Acquisition

partner interest and eliminated our sponsor’s incentive distribution rights, or IDRs, for a total consideration of $75 million in cash and 5,751,136 common units representing non-cash consideration, that was made effective as of April 1, 2022. The cash portion was funded with borrowings from our Credit Agreement. The Hardisty South Terminal, which commenced operations in January 2019, primarily consists of railcar loading facilities with capacity of one and one-half 120-railcar unit trains of transloading capacity per day, or approximately 112,500 barrels per day, of takeaway capacity.

We accounted for our acquisition of the Hardisty South Terminal as a business combination under common control, whereby we recognized the acquisition of identifiable assets at historical costs and recast our prior financial statements for all periods presented. The following tables show the adjustments and resulting balance for each affected line item in our consolidated statements of operations for the periods indicated:


	Three Months Ended March 31, 2022
	USD Partners LP (1)		Hardisty South Acquisition		Eliminations (2)		Consolidated Results
	(in thousands)
Revenues
Terminalling services	$	28,185	$	5,638	$	—	$	33,823
Terminalling services — related party	655		2,075		(2,075)		655


Fleet leases — related party	912		—		—		912

Fleet services — related party	299		—		—		299
Freight and other reimbursables	78		19		—		97

Total revenues	30,129		7,732		(2,075)		35,786
Operating costs
Subcontracted rail services	3,252		739		—		3,991
Pipeline fees	6,060		2,441		—		8,501
Freight and other reimbursables	78		19		—		97
Operating and maintenance	3,034		452		—		3,486
Operating and maintenance — related party	2,206		—		(2,075)		131
Selling, general and administrative	3,223		199		—		3,422
Selling, general and administrative — related party	2,032		3,292		—		5,324

Depreciation and amortization	5,507		332		—		5,839
Total operating costs	25,392		7,474		(2,075)		30,791
Operating income	4,737		258		—		4,995
Interest expense	1,385		117		—		1,502
Gain associated with derivative instruments	(6,084)		—		—		(6,084)
Foreign currency transaction loss	47		1,600		—		1,647
Other income, net	(23)		—		—		(23)
Income (loss) before income taxes	9,412		(1,459)		—		7,953
Provision for income taxes	421		59		—		480
Net income (loss)	$	8,991	$	(1,518)	$	—	$	7,473

(1)As previously reported in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022.

(2)Represents business transactions between USDP and Hardisty South, whereby Hardisty South provided terminalling services for a third-party customer of USDP for contracted capacity that exceeded the transloading capacity that was available.

Casper Terminal Divestiture

On March 31, 2023 we completed our divestiture of 100% of the equity interests in our Casper Terminal, which included the Casper Crude to Rail, LLC and CCR Pipeline, LLC entities, for approximately $33.0 million in cash, subject to customary adjustments.

The Casper Terminal entities had a carrying value of $26.8 million at the time of sale. The Casper Terminal was included in our Terminalling services segment. The Casper crude oil terminal, located in Casper, Wyoming, primarily consists of unit train-capable railcar loading capacity in excess of 100,000 barrels per day, six customer-dedicated storage tanks with 900,000 barrels of total capacity and a six-mile, 24-inch diameter pipeline with a direct connection from the Express Pipeline. We recognized a gain of $6.2 million from the sale of the terminal which we recorded as “Gain on sale of business” in our consolidated statement of operations. The gain on sale of business that resulted from the sale of the Casper Terminal was not subject to income tax as the entity is included within our partnership structure. Therefore, no impact was reflected within the “Provision for (benefit from) income taxes” recognized in the three months ended March 31, 2023 in our consolidated statements of operations.

In connection with our divestiture of the Casper terminal, we entered into a transition services agreement with the buyer, pursuant to which we will provide certain administrative, customer support and information technology support services to the Casper terminal for not more than three months following the closing date, while the buyer transitions such services to their management.

4. NET INCOME PER LIMITED PARTNER INTEREST

Our net income is attributed to limited partners, in accordance with their respective ownership percentages. For periods prior to the cancellation of the IDRs and conversion of the General Partner units to a non-economic General Partner interest that resulted from the acquisition of the Hardisty South entities that became effective April 1, 2022, we used the two-class method when calculating the net income per unit applicable to limited partners, because we had more than one type of participating securities. For the prior periods, the classes of participating securities included Common Units, General Partner Units and IDRs. Prior to the acquisition, our net earnings were allocated between the limited and general partners in accordance with our partnership agreement. As a result of the Hardisty South Terminal acquisition, the general partner units no longer participate in earnings or distributions, including IDRs. Our recast net income includes earnings related to the Hardisty South entities prior to our acquisition, which have been allocated to the General Partner.

We determined basic and diluted net income per limited partner unit as set forth in the following tables:


	For the Three Months Ended March 31, 2023
	Common Units		General Partner Units		Total
	(in thousands, except per unit amounts)
Net income attributable to limited partner interests in USD Partners LP	$	1,975	$	—	$	1,975
Less: Distributable earnings (1)	—		—		—
Excess net income	$	1,975	$	—	$	1,975
Weighted average units outstanding (2)	33,566		—		33,566
Distributable earnings per unit (3)	$	—
Underdistributed earnings per unit (4)	0.06
Net income per limited partner unit (basic and diluted) (5)	$	0.06

(1) There were no distributions payable for the three months ended March 31, 2023. Refer to Note 16. Partner ’ C a pital for further information.

(2) Represents the weighted average units outstanding for the period.

(3) Represents the total distributable earnings divided by the weighted average number of units outstanding for the period.

(4) Represents the additional amount per unit necessary to distribute the excess net income for the period among our limited partners and our general partners according to the distribution formula for available cash as set forth in our partnership agreement.

(5) Our computation of net income per limited partner unit excludes the effects of 1,454,327 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.


	For the Three Months Ended March 31, 2022
	Common Units		General Partner Units		Total
	(in thousands, except per unit amounts)
Net income attributable to general and limited partner interests in USD Partners LP (1)	$	8,842	$	(1,369)	$	7,473
Less: Distributable earnings (2)	3,633		3		3,636
Excess net income	$	5,209	$	(1,372)	$	3,837
Weighted average units outstanding (3)	27,440		461		27,901
Distributable earnings per unit (4)	$	0.13
Underdistributed earnings per unit (5)	0.19
Net income per limited partner unit (basic and diluted) (6)	$	0.32

(1)Represents net income allocated to each class of units based on the actual ownership of the Partnership during the period.

(2)Represents the distributions paid for the period based upon the quarterly distribution amount of $0.1235 per unit or $0.494 on an annualized basis for the three months ended March 31, 2022. Amounts presented for each class of units include a proportionate amount of the $167 thousand distributed to holders of the Equity classified Phantom Units pursuant to the distribution equivalent rights granted under the Amended LTIP Plan.

(3)Represents the weighted average units outstanding for the period.

(4)Represents the total distributable earnings divided by the weighted average number of units outstanding for the period.

(5)Represents the additional amount per unit necessary to distribute the excess net income for the period among our limited partners and our general partners according to the distribution formula for available cash as set forth in our partnership agreement.

(6)Our computation of net income per limited partner unit excludes the effects of 1,366,747 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.

5. REVENUES

Disaggregated Revenues

We manage our business in two reportable segments: Terminalling services and Fleet services. Our segments offer different services and are managed accordingly. Our chief operating decision maker, or CODM, regularly reviews financial information about both segments in order to allocate resources and evaluate performance. As such, we have concluded that disaggregating revenue by reporting segments appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Refer to Note 14. Segment Reporting for our disaggregated revenues by segment. Additionally, the below tables summarize the geographic data for our revenues:


	Three Months Ended March 31, 2023
	U.S.		Canada		Total
	(in thousands)
Third party	$	2,456	$	17,473	$	19,929
Related party	$	1,140	$	57	$	1,197


	Three Months Ended March 31, 2022
	U.S.		Canada		Total
	(in thousands)
Third party	$	7,336	$	26,584	$	33,920
Related party	$	1,866	$	—	$	1,866

Remaining Performance Obligations

The transaction price allocated to the remaining performance obligations associated with our Terminal and Fleet services agreements as of March 31, 2023 are as follows for the periods indicated:


	Nine months ending December 31, 2023		2024		2025		2026		2027		Thereafter		Total
	(in thousands)
Terminalling Services (1) (2)	$	36,887	$	25,295	$	24,149	$	24,149	$	20,240	$	72,526	$	203,246
Fleet Services	90		—		—		—		—		—		90
Total	$	36,977	$	25,295	$	24,149	$	24,149	$	20,240	$	72,526	$	203,336

(1)A significant portion of our Terminal Services Agreements are denominated in Canadian dollars. We have converted the remaining performance obligations associated with these Canadian dollar-denominated contracts using the year-to-date average exchange rate of 0.7396 U.S. dollars for each Canadian dollar at March 31, 2023.

(2)Includes fixed monthly minimum commitment fees per contracts and excludes constrained estimates of variable consideration for rate-escalations associated with an index, such as the consumer price index, as well as any incremental revenue associated with volume activity above the minimum volumes set forth within the contracts.

We have applied the practical expedient that allows us to exclude disclosure of performance obligations that are part of a contract that has an expected duration of one year or less.

Deferred Revenue

Our deferred revenue is a form of a contract liability and consists of amounts collected in advance from customers associated with their terminal and fleet services agreements and deferred revenues associated with make-up rights, which will be recognized as revenue when earned pursuant to the terms of our contractual arrangements. We currently recognize substantially all of the amounts we receive for minimum volume commitments as revenue when collected, since breakage associated with these make-up rights is currently approximately 99% based on our expectations around usage of these options. Accordingly, we had $0.1 million and $0.4 million deferred revenue at March 31, 2023 and December 31, 2022, respectively, for estimated breakage associated with the make-up rights options we granted to our customers.

We also have deferred revenue that represents cumulative revenue that has been deferred due to tiered billing provisions. In such arrangements, revenue is recognized using a blended rate based on the billing tiers of the agreement, as the services are consistently provided throughout the duration of the contractual arrangement, which we included in “Other current liabilities” and “Other non-current liabilities” on our consolidated balance sheets.

The following table presents the amounts outstanding on our consolidated balance sheets and changes associated with the balance of our deferred revenue for the three months ended March 31, 2023:


	December 31, 2022		Cash Additions for Customer Prepayments		Balance Sheet Reclassification		Revenue Recognized		March 31, 2023
	(in thousands)
Deferred revenue (1)	$	3,562	$	2,572	$	—	$	(3,562)	$	2,572

Other current liabilities (2)	$	5,681	$	—	$	258	$	(2,314)	$	3,625
Other non-current liabilities (2)	$	3,943	$	4	$	(258)	$	—	$	3,689

(1) Includes deferred revenue of $0.1 million and $0.4 million at March 31, 2023 and December 31, 2022, respectively, for estimated breakage associated with the make-up right options we granted our customers as discussed above.

(2) Includes cumulative revenue that has been deferred due to tiered billing provisions included in certain of our Canadian dollar-denominated contracts, as discussed above. As such, the change in “Other current liabilities” has been increased by $6 thousand and “Other non-current liabilities” presented has been increased by $4 thousand due to the impact of the change in the end of period exchange rate between March 31, 2023 and December 31, 2022.

Deferred Revenue — Fleet Leases

Our deferred revenue also includes advance payments from our customer of our Fleet services business, which will be recognized as Fleet leases revenue when earned pursuant to the terms of our contractual arrangements. We have included $0.1 million at March 31, 2023 and at December 31, 2022, in “Deferred revenue — related party” on our consolidated balance sheets associated with our customer’s prepayment for our fleet lease agreements. Refer to Note 8. Leases for additional discussion of our lease revenues.

6. RESTRICTED CASH

We include in restricted cash amounts representing a cash account for which the use of funds is restricted by a facilities connection agreement among us and Gibson Energy Inc., or Gibson, that we entered into during 2014 in connection with the development of our Hardisty Terminal. The collaborative arrangement is further discussed in Note 11. Collaborative Arrangement.

In addition, we have an indemnity escrow account of $2.0 million included in our restricted cash amounts associated with the divestiture of our Casper Terminal that is required to be held for one year from the March 31, 2023 closing date of the sale of the terminal and $19.1 million in restricted cash held for repayment on our Credit Agreement per the covenants that was required to be paid within three days of the closing date of the sale of the Casper Terminal. Refer to Note 3. Acquisitions and Dispositions for a further discussion of the Casper Terminal divestiture and Note 19. Subsequent event for a discussion of payments made on our Credit Agreement subsequent to March 31, 2023.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within our consolidated balance sheets to the amounts shown in our consolidated statements of cash flows for the specified periods:


	March 31,
	2023		2022
	(in thousands)
Cash and cash equivalents	$	10,843	$	4,497
Restricted Cash	23,659		7,439
Total cash, cash equivalents and restricted cash	$	34,502	$	11,936

7. PROPERTY AND EQUIPMENT

Our property and equipment is comprised of the following asset classifications as of the dates indicated:


	March 31, 2023		December 31, 2022		Estimated Useful Lives (Years)
	(in thousands)
Land	$	3,225	$	10,110	N/A
Trackage and facilities	99,449		108,325		10-30
Pipeline	6,046		12,759		20-30
Equipment	22,288		22,553		3-20

Furniture	84		84		5-10
Total property and equipment	131,092		153,831
Accumulated depreciation	(48,843)		(47,360)
Construction in progress (1)	175		423
Property and equipment, net	$	82,424	$	106,894

(1)The amounts classified as “Construction in progress” are excluded from amounts being depreciated. These amounts represent property that has not been placed into productive service as of the respective consolidated balance sheet date.

Depreciation expense associated with property and equipment totaled $1.8 million and $2.7 million for the three months ended March 31, 2023 and 2022, respectively.

8. LEASES

Lessee

We have noncancellable operating leases for railcars, buildings, storage tanks, offices, railroad tracks, and land.


	Three Months Ended March 31, 2023
Weighted-average discount rate	4.5	%
Weighted average remaining lease term in years	6.21

Our total lease cost consisted of the following items for the dates indicated:


		Three Months Ended March 31,
		2023		2022
	(in thousands)

Operating lease cost		$	326	$	1,515
Short term lease cost		31		31
Variable lease cost		6		18
Sublease income		(283)		(1,281)
Total		$	80	$	283

The maturity analysis below presents the undiscounted cash payments we expect to make each period for property that we lease from others under noncancellable operating leases as of March 31, 2023 (in thousands):


2023	$	420
2024	115
2025	114
2026	117
2027	121
Thereafter	384
Total lease payments	$	1,271
Less: imputed interest	(195)
Present value of lease liabilities	$	1,076

Lessor

We serve as an intermediary to assist our customers with obtaining railcars. In connection with our leasing of railcars from third parties, we simultaneously enter into lease agreements with our customers for noncancellable terms that are designed to recover our costs associated with leasing the railcars plus a fee for providing this service. In addition to these leases we also have lease income from storage tanks and lease income from our related party terminal services agreement associated with transloading renewable diesel at our West Colton Terminal that commenced in December 2021. Refer to Note 12. Transactions with Related Parties for additional discussion.


	Three Months Ended March 31,
	2023		2022
	(in thousands, except weighted average term)
Lease income (1)	$	1,278	$	2,486
Weighted average remaining lease term in years			3.57

(1)Lease income presented above includes lease income from related parties. Refer to Note 12. Transactions with Related Parties for additional discussion of lease income from a related party. In addition, lease income as discussed above totaling $1.0 million and $1.6 million for the three months ended March 31, 2023 and 2022, respectively, is included in “Terminalling services” and “Terminalling services — related party” revenues on our consolidated statements of operations.

The maturity analysis below presents the undiscounted future minimum lease payments we expect to receive from customers each period for property they lease from us under noncancellable operating leases as of March 31, 2023 (in thousands):


2023	$	2,513
2024	2,944
2025	2,936
2026	2,687


Total	$	11,080

9. INTANGIBLE ASSETS

USD Partners LP [USDP] Filings
10-Q	[2023-05-04]
10-K	[2023-03-02]
10-Q	[2022-11-02]
10-Q	[2022-08-05]
10-Q	[2022-05-05]
10-K	[2022-03-03]
10-Q	[2021-11-03]
10-Q	[2021-08-05]
10-Q	[2021-05-06]
10-K	[2021-03-04]
10-Q	[2020-11-05]
10-Q	[2020-08-06]
10-Q	[2020-05-07]
10-K	[2020-03-05]
10-Q	[2019-11-07]
10-Q	[2019-08-06]
10-Q	[2019-05-07]
10-K	[2019-03-07]
10-Q	[2018-11-06]
10-Q	[2018-08-07]
10-Q	[2018-05-08]
10-K	[2018-03-09]
10-Q	[2017-11-08]
10-Q	[2017-08-08]
10-Q	[2017-05-04]
10-K	[2017-03-09]
10-Q	[2016-11-03]
10-Q	[2016-08-04]
10-Q	[2016-05-05]
10-K	[2016-03-10]
10-Q	[2015-11-13]
10-Q	[2015-08-12]
10-Q	[2015-05-14]
10-K	[2015-03-31]
10-Q	[2014-11-21]
S-1	[2014-08-29]